Archive for FSA

Insurance Companies Should Support Barclays Shareholders Bonus Demands

Regular readers of Insurance Blog will know that we are not fans of Banc-assurance, indeed if it was mandatory you’d find us voting for UKIP in next months local elections!

The whole concept of banc-assurance, a European import of the mid Nineteen Nineties, with it’s centralised lifestyle, bank and insurance personal umbrella,  has stunk of plutocracy since the cosy relationships were first formed to maximise profit for the few.

PPI claims and mis-selling are just one example of things that would never have occurred if Banks had not been allowed to sell insurance products. (or should I re-phrase that ‘mis-sell’).

Large un-democratic multi-nationals are not good for competition or the UK Economy and the evidence shows that they are stifling business growth. Critics may argue that the market will decide and shareholders make this process democratic.

Not when over 70% of the shares in the Banks are owned by the large Insurance Companies, including in particular the large life  insurance and pension fund composites of Aviva, Legal & General and RSA, to name just a few!

Don’t just blame the previous Labour Government (FSA) for the mess that was created outside of their control. The fact that as predicted here two years ago, the UK has this week slipped into the dreaded double-dip recession, shows the problem is fundamently structural and lies in the ownership, management and control of the banks and mortgage lenders who control the money supply and are responsible for the current Western recession.

Incidently, by restricting credit they are also currently responsible for killing British entreprenuerial spirit and destroying growth potential in SME business.

The poor management speaks for itself in shareholder dividends. Just a penny in the pound for those poor shareholders of Barclays!

Today they are openly up in revolt to demand that the Chief Executive is not worth his $4 million annual bonus. Quite rightly so in our humble opinion. The overpaid who fail should not be rewarded, especially at the expense of those who take the risks.

Barclays chief executive Bob Diamond received a £1.35m salary and a £2.7m bonus for 2011, with an additional £2.25m in long-term incentive payments. Barclays has set aside an extra £300m for settling claims of mis-selling payment protection insurance. A £2.62bn accounting adjustment and the extra Payment Protection Insurance Claims reserve meant the bank reported a statutory pre-tax loss of £475m in the first quarter of this year as opposed to a £1.66bn profit a year ago.

More importantly though, the actions of these minions will fail as the outrageous bonuses are supported by the Insurance companies, who own big blocks of shares and voting rights.

There is your Plutocracy!

Regardless of your political allegiances, before you renew your insurance, if you can afford to that is, think about how these multi-nationals are encouraging the sort of undemocratic behaviour seen today that should not be seen at all, especially in a time when millions of families in the UK, it has also been announced today, between them owe £58 billion in debt mostly composed of interest and bank charges, to these very same ‘institutions’.


Mis Sold PPI? Claims Could Reach Titanic Proportions

PPI Claims To Date Are Only The Tip Of The Iceberg

Despite the banks and others who missold payment protection insurance (PPI) being forced to pay out over £2 billion to date, it appears from the latest reports and estimates that this could be just the tip of the iceberg as the misselling scandal escalates, with an expected final payout of over £9 billion in compensation. Billions are still waiting to be claimed.

Mis-sold PPI? Claim now before its too late

Last year alone over 200,000 complaints were made to the Financial Ombudsman about individual policies, despite instructions from the FSA for all those involved to deal fairly with their customers.

Both these figures indicate that although most of the major financial institutions and banks that missold PPI are taking some steps to compensate those that they missold the products to, many people are either not being notified that they are due for compensation, or it appears that an even greater amount may not be aware that they even had PPI and that they have been paying for it in charges since they first took out the debt.

It also appears from the number of continual complaints to the Financial Ombudsman that the compensation offered by those guilty financial institutions has been in many cases derisory or insufficient.

This has been particularly the case where individuals have sought to deal with the PPI claims themselves, rather than seek the help of those professional claims teams and lawyers who have years of experience in maximising claims settlements through negotiation and the courts.

The FSA is concerned by the titanic scale of the misselling and has extended the period for which claims can be dealt with in order for the firms and the courts to deal with the high demand.

PPI was missold throughout the last decade by nearly all the major institutions including all the high street banks and most of the mortgage, loan and credit card companies. It was often sold on the back of credit agreements, where it was neither explained properly to the client or the client do not want or need it.

Many people who were aware they had purchased PPI, bought the cover because they feared their credit application would be refused if they did not agree.

In the most extreme of cases it was often sold to people who could never claim, such as those with existing medical conditions, pregnancy or the self-employed.

If you think you may have been missold PPI, Insurance Blog urges you to check the wordings of all your credit agreements and to act quickly to contact a PPI claims specialist to assist you in your fight for compensation.

The iceberg of claims may be melting slightly, however there are rules of limitation under UK law and the right to be compensated for being missold PPI may not be around for too much longer.

Shadow Banks Not Banks To Blame For UK Economic Crisis says FSA

Lord Turner, Head of the Government owned,  insurance broker  subsidised UK financial services authority the FSA, has been busy espousing his thoughts on the current economic crisis and apparently the banks are not to blame for the banking crisis!

It’”s not the banks, its the Shadow banks who are to blame”, cries the Lord. These shadow banks are still out there doing damage’ said the Lord, and one can only suppose from his attack that their activities are outside the control of the current banking reforms, and his influence.

Shadow Banks? What on earth are they then me lawd?

Well according to his honourable lordship in last nights speech,  “In autumn 2008 the developed world’s banking system suffered a severe crisis … but it’s striking that the crisis did not initially seem to be one of banks themselves, but rather of an apparently new phenomenon: shadow banking. So we need to ensure that our regulatory response appropriately covers shadow banking as well as banks.”

(Whooa! Hold on me lawd. What about the activites of RBS, Northern Rock, LLoyds etc etc etc. Insurance blog got sick of writing about the baknks in the autumn of 2008. Read our archives!)

Lord Turner then described shadow banking as activities including securitised lending, hedge funds active in credit markets, investment bank trading of credit securities, the issuance of asset-backed commercial paper and the repossession market.

Hmm, yes that covers just about everything that Banks and Insurance companies do with your money when they take your salary, insurance premiums and mortgage payments.

Which begs the question that those in the UK insurance sector have been asking about the FSA since its foundation in 2005. Just what regulatory powers can the FSA possibly have over the Global Free Market other than being a souped up consumer protection vehicle through the FSCS, beggars belief.

If it is aware of all the shadowplay, which is carried out by all the big groups, banks, insurance and assurance companies and holding companies that the FSA is supposed to be regulating, then just what can it do to avert a future scenario like we saw in 2008?

Insurance blog is still firmly of the opinion that the FSA is full of overpaid, bloated bureaucrats, funded by insurance fees, that is no better than an after the event vehicle and punishment body for money making in  fines.

Face it Lord Turner, the FSA will never be able to tell the City how to do business only maybe how to conduct it!

Mortgage Companies Attempt To Avoid New PPI Misselling Rules

The availability of mortgages at all levels is essential to kick-start the failing housing market and the industries that rely upon this, from construction to those selling white goods or home insurance. Without readily available and free flowing capital, the UK economy will self implode.

However it now appears that the ‘not so ready to lend’ lenders, principally the banks and building societies who caused the mess in the first place, are now restricting the capital flow further with the provision of ‘new’ products designed to protect their capital and circumvent the recent legislation outlawing the selling of PPI (Payment protection insurance) at point of sale of the loan or mortgage.

Fortunately both the FSA and consumer watchdog , the OFT (Office of Fair Trading) have been keeping a close eye on these activities and have today issued a joint statement warning the providers of these products to obey the rules or face the consequences. Both UK Government organisations are determined that another PPI mis-selling scandal should be avoided as new mortgage protection products emerge.

The two quangos have joined forces on proposed guidelines to lenders in relation to new PPI type products, the responsibility for which can fall within either regulator’s area of operations.

The statement emphasises that now is a key time to reinforce the regulations as the insurance market shifts away from PPI and providers begin to develop new products or product features.

Under particular scrutiny are short-term income protection marketed as debt freeze or debt waiver when included with a credit or loan agreement or mortgage.

Some of the payment protection products that the FSA and OFT considered during the preparation of this proposed guidance are:

Insurance. This includes short term income protection or ‘STIP’, an insurance contract which provides a pre-agreed amount to the policy holder if they experience involuntary redundancy or are incapacitated through sickness or as a result of an accident and may be combined with other forms of insurance cover or include other benefits, and which:

o has a maximum time-limited benefit duration;
o is written for a term which is less than 5 years and not predetermined by the term of any credit agreement or RMC; and
o can be terminated by the Insurer.

Non Insurance the creditor agrees to freeze or waive the requirement on a consumer to make periodic repayments, or to freeze or waive interest or other charges, when a specified ‘event’ occurs, such as sickness or unemployment.

Insurance products are regulated by the FSA under the Financial Services and Markets Act 2000 (FSMA). Non-insurance protection linked to a regulated first charge mortgage contract are also regulated by the FSA. Non-insurance protection linked to a credit or hire agreement (including a second charge mortgage) will typically be regulated by the OFT under the Consumer Credit Act 1974 (CCA).

The two organisations will continue to monitor developments in the market, and will take appropriate action under their respective powers where products or practices risk causing detriment to consumers.

The FSA’s guidance stresses that firms should ensure that product features reflect the needs of the consumers they are targeting.

Margaret Cole, FSA managing director, said: “This is the first time that the FSA has issued guidance on the design of a specific product. Firms must learn the lessons of the past and make sure they have consumers’ needs at the heart of new product development.

“That is why we are acting early to ensure firms understand the risks they should bear in mind when designing these products, and how they can manage these risks when developing or distributing the product.

“The FSA cited new forms of payment protection products as an emerging risk in its Retail Conduct Risk Outlook earlier this year, and we are following up on that warning.”

The OFT’s guidance sets out how the OFT considers the Consumer Credit Act applies to payment protection products such as debt freeze or debt waivers linked to a regulated credit agreement, and what firms can do to ensure compliance.

In particular, firms should ensure that consumers are absolutely clear about the nature, price and implications of payment protection products.

For example, if an agreement is offered with an option to choose debt waiver terms, on payment of a fee, it may be necessary to provide financial information including and excluding the cost of the debt waiver.

The guidance also sets out examples of business practices in relation to payment protection products which the OFT is likely to regard as unfair or improper (whether unlawful or not) and so may cast doubt on fitness to hold a consumer credit licence.

David Fisher, the OFT’s Director of Consumer Credit, said: “It is important that the problems encountered with mis-selling of PPI do not arise in relation to new payment protection products.

“Firms need to ensure that they comply with relevant legislation and do not engage in unfair or improper business practices. In particular, they should make clear to consumers what they are signing up to and how much it costs, so that they can make properly informed decisions.”

The consultation will be open for ten weeks, closing on January 13.

With unemployment threatening to reach record levels as the public sector shrinks, it is essential that consumers can purchase protection against accident sickness and unemployment when they commit to a mortgage or large loan. Mortgages must be made easier to obtain and mortgage protection products available to alleviate some of the risks involved in lending for both parties.
There are many established independent specialist companies out there who offer insurance at much cheaper rates than the loan or mortgage providers. Maybe one solution to this ongoing saga would be to outlaw totally the provision of cover for debt by the debt provider and its subsidiaries however they want to dress it up in fancy wordings.

FSA To Clampdown On Insurance Selling On The Internet In The UK

The FSA may well have the axe hanging over it’s head, be over-populated by a bunch of pen pushers and bureaucrats, culpable for the restriction in insurance products and markets available and be responsible for failing to avert the recession caused by the banks, but…….

Insurance Blog will be the first to admit that the FSA in it’s swansong is at least trying to do the right thing, with some notable recent successes in prosecutions and forcing the banks to heel over the mis-selling of payment protection insurance.

Those small insurance brokers, insurance agents, consultants and intermediaries whose rising FSA authorisation costs and annual fees have helped fund the Financial Services Compensation Scheme to pay for the banks mis-selling crimes would be the first to disagree, however their contempt for the organisation might be tempered some if they were aware of the FSA’s latest moves against their largest competitors……

The Insurance price comparison websites and aggregators selling general insurance products on the Internet.

If the FSA’s latest proposals for the regulated Selling of Insurance on the Internet are enforced, this could be a good thing for all small insurance intermediaries out there, who collectively currently receive less than 5% of the total internet traffic searching for Insurance.

First in the line of fire has been the Insurance price comparison websites, particularly those that compare car insurance and home insurance, and recommend insurance products to the public. In it’s investigation the FSA found serious breaches of it’s rules on the regulation of giving advice and selling of insurance. It subsequently wrote to 19 firms that it considers are breaking these rules in regards to advice and arranging contracts of insurance.

The letter advised the 19 Price Comparison websites:

· review your regulated activities and ensure you are appropriately authorised or otherwise exempt;

· ensure that you only enter into contracts with firms holding the appropriate authorisation and permissions to conduct that regulated activity (or who are exempt);

· withdraw your assistance from third parties if they are in breach of the general prohibition;

· review your disclosure documentation, sales procedures and your terms and conditions and make sure that these are compliant with all relevant regulatory requirements including our Guidance consultation Principles, ICOBS and the Unfair Terms in Consumer Contracts Regulations 1999. In particular, you should ensure they comply with  requirements on: customer eligibility, status disclosure, advice suitability, providing a proper statement of demands and needs, and that you do not seek in your terms and conditions to exclude liability for the regulated activities you are undertaking; and
establish, implement and maintain adequate policies and procedures to ensure your firm complies with all relevant obligations under the regulatory system and for countering the risk of furthering financial crime, in particular breaches of the general prohibition and restrictions on financial promotion.

A price comparison firm may be arranging contracts of insurance where its activities involve any of the following:

· the firm provides links to product companies or intermediaries for the purpose of enabling the customer to purchase a chosen insurance product;

· the firm requires a pre-purchasing questionnaire to be completed in order to filter sales (i.e. where the intermediary asks a series of questions and then suggests several specific products.

Under these guidelines it would appear that any website that collects information with the view to arranging insurance or even provides a link, is breaking the FSA rules if not authorised to do so….

The FSA found the folowing types of Insurance websites in breach where they are not FSA regulated:

· the firm provides a comparison of the terms of different policies as opposed to a passive display of the features of different policies;

· the firm runs a website which is funded by one or more insurance or mortgage providers (i.e. it is not ‘independent’); and/or
· the firm offers a special discount on the product to its website users.

. Even where no financial benefit is derived, the firm may still be making arrangements if it brands the comparison service with its own name, endorses the service or otherwise encourages users to respond to it, negotiates special rates for users, or holds out the service as something arranged for the benefit of users.

Advising on insurance
The FSA now considers any type of recommendation as giving advice. In addition where the effect of the firm’s arrangements constitutes a recommendation to purchase a specific product or products, that recommendation is likely to involve the firm giving regulated advice.

Some indicators of where a website or price comparison website may contain advice which is regulated by law include:

· where the name or logo of only one insurance product is displayed on the website in a manner that suggests that the particular product is to be preferred over other products (for example, a particular logo might appear on a webpage containing generic advice on the merits of incapacity insurance contracts);

· where a particular insurance product is recommended as the ‘pick of the best’ product out of a number of other products in its category;

· where a particular insurance product is star-rated by a website, for example, the product is awarded five out of five stars, by contrast to a similar product which is awarded two out of five stars;

· where a scripted questionnaire gives a recommendation or opinion which influences the choice of insurance product and then goes on to identify a particular insurance or regulated mortgage product to which the advice relates;

· where the questioning process has resulted in the identification of one or more particular contracts of insurance based on a non-objective assessment of the product features;

· where the website generally makes any value judgement as to the merits of one or more insurance products or regulated mortgage contracts, by way of scripted questioning or otherwise;

· where generic best buy tables are used and are not populated from specific consumer information this might be advice depending on the consumer’s experience of it. So, for example, a website containing solely generic ‘best buy’ tables explaining the merits of futures as opposed to options would not be advice, but if those tables guide the consumer to a particular insurance product based on the consumer’s personal requirements, this is likely to be regulated advice;

· where generic statements on a website are not dependent on consumer information being populated; this could be regulated advice where they are displayed in such a way that the website operator is making value judgements as to the merits of buying, selling, etc. For example, ‘The products of the month are XYZ, ABC and DEF investments because they offer the best returns’.

Clearly if implemented to the full the following types of insurance marketing would be illegal on the Internet in the UK for all websites that are not authorised and regulated and will have huge ramifications for the way insurance is distributed online in the future:

· Linking of any sort to Insurance Provider or Insurance Comparison website (Text links and Banner ads)
· Distributing Articles and Media that link to or promote insurance products (Article Directories, Video Directories, Social Media, Blogs)
· Affiliate Marketing and Vertical Marketing by non regulated affiliates
· Review Websites
· White Labelled Websites
· Marketing Websites

Insurance Blog thinks that this is a good thing, if it is properly policed as it will remove a lot of the chaff from the Internet, much eminating from unqualified webmasters both inside and outside of the UK. We are of course authorised and regulated under our Insurance Publishing Group owners Insuretec Ltd. FSA no. 422934 and would love to see our FSA fees used in this way! And as a word of advice, when filling out an insurance proposal form online, no matter it’s detail, always check that the website states its FSA number and regulatory status, which can also be found at the FSA’s website.